UPDATE 2-Libyan congresses delay Gaddafi's oil shareout plan

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(Updates with context and analyst comment)

SIRTE, Libya, March 3 (Reuters) - Libya’s people’s congresses, the country’s highest authority, have voted to delay Muammar Gaddafi’s plan to disband the government and give oil money directly to the people, according to a tally published on Tuesday.

Gaddafi presented the plan as a way to counter criticism of corruption in the government, arguing that it was so deeply entrenched that ministries must be disbanded and oil revenue handed directly to the people. But he also took pains to spell out its disadvantages.

“My dream during all these years was to give power and wealth directly to the people,” the Libyan leader, who took power in 1969, told the public as he put forward the plan.

But there was an unusual public airing of dissent from top government officials, who said the plan would wreak havoc in the economy by fanning inflation and spurring capital flight.

And Gaddafi himself warned Libyans that the scheme, which promised up to 30,000 dinars ($23,000) a year to about a million of Libya’s poorest, would cause chaos before it brought about prosperity.

“Do not be afraid to experiment with a new form of government,” he told them prior to the vote, before warning:

“This plan is to offer a better future for Libya’s children. If you fail to make it succeed, I will then wash my hands of you.”

Despite their concerns that a ruling clique around Gaddafi monopolise Libya’s oil wealth, many Libyans began asking where they would send their children to school if there was no education ministry, or whether hospitals would continue to operate if the health ministry was dismantled.

At votes held across the country last month, only 64 of the 468 Basic People Congresses (LBPCs), people’s parliaments chosen from among the ordinary populace but largely controlled by Gaddafi, voted for his plan to hand out the money now.

A majority of 251 endorsed the plan in principle “but asked for (it) to be delayed until appropriate measures were put in place”, according to the state news agency Jana.

Jon Marks, a London-based Libya analyst, said Gaddafi’s plan had unsettled government officials and civil servants.

“This led to a paralysis in the government, which in turn made the plan unpopular among ordinary people,” he said.

The results of the vote were announced on Tuesday at a meeting of the General Public Congress (GPC), the umbrella body of the LBPCs, which are nominally Libya’s highest executive and legislative authority, at Gaddafi’s home town, Sirte.

The GPC was due to issue a document summarising the final wishes of the LPBCs late on Wednesday. This was likely to block the scheme for several months at least, giving time for it to be watered down.

Libyan dissidents wrote in comments posted on the Internet that, even if the voters approved it, Gaddafi’s plan would not work because government corruption would always prevent a fair distribution of oil wealth.

They said that Libya’s social development would be severely damaged if the government was disbanded, because without central government basic infrastructure, health and education services would be poorly managed. (Writing by Lamine Ghanmi; Editing by Kevin Liffey)